Blue Sky Alternative Investments fails to meet key condition of $50m Oaktree loan as talks continue to save the deal

Troubled Blue Sky Alternative Investments’ shares hit a record low after it confirmed it is in breach of a key condition of its $50m loan from its US saviour.

Blue Sky Alternative Investments has hit rough water as it today confirmed it is in breach of a key financial covenant

SHARES in Blue Sky Alternative Investments have slumped to an all-time low after it confirmed it was in breach of a covenant in relation to a $50 million loan from its US saviour.

The Brisbane-based investment group told shareholders it had not met its obligations to Oaktree Capital, which last year gave Blue Sky a seven-year, $50 million loan facility.

Blue Sky warned in February it was trying to negotiate to avoid breaching the covenant. Blue Sky, which oversees assets from student accommodation to a burrito chain, was a stock market darling until March last year, when short-sellers drew attention to alleged overstatements of performance by the company.

While Blue Sky denied the claims, it has since taken hits to values of its investment.

Its shares slumped 1.5¢ or 7.14 per cent to 19.5¢ on Thursday, after hitting a record low of 19¢ earlier in the day.

The stock was trading at $11.43 in March last year before the short-selling attack by US hedge fund Glaucus. The stock reached a record high of $14.99 in November 2017.

Blue Sky on Thursday that lending covenants related to requirements for minimum recurring cash earnings, had not been metas of the end of March, as it posted a net loss after tax of $25.7 million for the first half of the year.

“The company has been in constant discussion with Oaktree to vary and/or restructure,” Blue Sky said.

“These discussions have been constructive to date and remain ongoing although agreement has not been reached with Oaktree in relation to a variation or restructure at this stage and Oaktree has not waived the financial covenant breach.”

Under the agreement Oaktree has the right to call for early repayments if obligations are not met. Blue Sky said it accepted the financial lifeline last year when it was in a “transitional state” to strengthen its capital and liquidity following “significant disruption”.

“The board remains committed to supporting the company’s renewed executive team … and will continue to keep the market updated.”

In March, Blue Sky recruited Sydney investment boss Joel Cann as chief executive officer 11 months after the last permanent chief executive, Rob Shand resigned amid the share-price shellacking.